Ecommerce keeps crushing brick-and-mortar retailers, except in autos, gasoline, and food, but even there, the tide is slowly turning.
By Wolf Richter for WOLF STREET.
The Census Bureau reported today that ecommerce sales in Q2 rose by 6.6% from Q2 2023, and by 15.7% from Q2 2022 to $282 billion. But retail sales without ecommerce — so brick-and-mortar sales — inched up only 1.0% year-over-year, to $1.85 trillion, and were roughly flat with Q2 2022 (all figures not seasonally adjusted).
Since the end of 2018, ecommerce sales have soared by 121.6% (red line), while retail sales without ecommerce — brick-and-mortar sales — have risen only 28.6%, and note the stagnation since Q2 2022 (blue line and purple box).
Ecommerce has been growing at far faster rates than brick-and-mortar retail from the beginning. In the first half of 2020, ecommerce sales exploded, while brick-and-mortar sales fell. In the second half of 2020 and through the high-inflation years 2021 and 2022, they bounced back, but not enough to prevent the gap from widening further. But starting in Q2 2022, with inflation in goods beginning to fade, brick-and-mortar sales stagnated while ecommerce sales kept surging.
Walmart keeps saying the same thing quarter after quarter: Its ecommerce sales are booming – last week, Walmart US reported 22% year-over-year growth in ecommerce sales for its second quarter. And it reported that grocery sales are strong; it’s the largest grocer in the US. But the rest of the stuff at its brick-and-mortar stores is weak.
Many dozens of brick-and-mortar chain stores and countless regional chains and major independent stores that didn’t get the message about ecommerce and groceries – such as department stores – have collapsed into bankruptcy over the years and are gone, in a phenomenon that we’ve called since 2016, the Brick-and-Mortar Meltdown.
Ecommerce sales on a seasonally adjusted basis rose to a new record in Q2 of $292 billion (red in the chart below), according to the Census Bureau today.
On a not seasonally adjusted basis, the big spikes occur in Q4, the holiday shopping season. In Q4 last year, sales spiked to $323 billion (blue).
The share of ecommerce sales of total retail sales rose to 16.0% in Q2 2024, just a hair below where it had been in Q2 2020 (16.4%). In Q4 2023, during the holiday binge, the share of ecommerce sales had risen to 17.1%.
During the lockdown, when many retail stores were closed, ecommerce sales exploded, and the share of ecommerce sales of total retail sales spiked to 16.4% in Q2 2020, up from 9.9% a year earlier. Then as stores reopened, ecommerce sales continued to grow, but brick-and-mortar sales bounced back amid revived auto sales and gasoline sales. And so the share of ecommerce of total retail sales eased off the Q2 2020 spike but remained much higher than before the pandemic.
But in Q4 2022, ecommerce began to increase its share again as retail sales without ecommerce began to stall. The green line represents the prepandemic trend of share increases:
Some stuff is still hard to sell online.
Some things will never be sold online, such as gasoline; sales at gas stations account for about 9% of retail sales. But they’re gradually getting hit by a new factor: The growing share in the national fleet of EVs.
Groceries have been a tough one to crack for ecommerce in the US. And it’s a big part of retail: food and beverage stores alone account for about 14% of retail trade, not including general merchandise stores that also sell food, such as Walmart, the largest grocer in the US with reportedly a 24% share of grocery sales.
But some grocery sales have moved online over time. And online-only grocers have sprung up to sell specialty foods, such as Weee, which specializes in Asian and Hispanic foods, and delivers directly from its local fulfillment centers via its own fleet of vehicles and via contractors.
The largest retailer category, auto dealers, which account for about 22% of retail trade sales, have seen used-vehicle sales move online for years, and all the big dealers are doing it now, in addition to the online-only used vehicle dealers, such as Carvana. So that has been happening.
But new vehicle sales are under the rule of state franchise laws, which prohibit automakers from selling directly to consumers. While these laws are older than dirt, they had the effect of largely protecting new-vehicle dealers from ecommerce competition, but even three cracks are forming. And Tesla has found a way around the state franchise laws; it sells vehicles online directly to consumers. Some other EV startups do as well.
Ecommerce did that.
Department stores, electronics stores, book stores, record stores, gift shops, and just about all the stores the generally populated indoor shopping malls have been very vulnerable from day one, and ecommerce crushed them one after the other. All big furniture retailers have shifted a big portion of their sales to ecommerce business. One of the largest furniture retailers is Wayfair, an online-only retailer with $12 billion in sales in 2023.
The prime example are department stores, which in 1992 (as far as the retail sales data go back to) accounted for 10% of retail trade sales. By July, the brick-and-mortar sales of the few surviving department stores accounted for just 1.8% of total retail sales.
There isn’t a thing in a department store that you cannot buy online. And the surviving department stores all have big ecommerce operations. Macy’s is one of the biggest ecommerce retailers in the US. But it keeps closing its brick-and-mortar stores.
But brick-and-mortar department stores sales are in the process of vanishing. The heyday was the year 2000. Since then, sales have collapsed by 44% despite 23 years of inflation and population growth. Ecommerce did that.
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The post The Only Thing Pushing Up Retail Sales Is Ecommerce. Brick-and-Mortar Sales Have Stagnated for 2 Years appeared first on Energy News Beat.
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